Posts Tagged ‘ china recession ’

What a start to the year. CJF’s contrarian prediction of 1,860 on the S&P came to be on January 20th. Subsequently, the market rallied strongly on the hint of more quantitative easing out of the ECB, and the adoption of negative interest rates by the Bank of Japan. Any doubts that 2016 will be a volatile, and difficult year, should now be erased. After a tumultuous January for investing, a period when seasonality and investment inflows are supposed to support markets, CJF is stepping back to assess big picture dynamics for the global economy and the overall investment environment. At risk of being overly obvious: Something is not quite right with the global economy In the seventh year of recovery since the financial crisis, Brazil is in recession, Russia...

The Fed’s lack of policy response, and subsequent press conference, evokes memories of a scene in Bronx Tale… What’s going on here? Now you can’t leave. I will never forget the look on their faces. All eight of them.Their faces dropped. All their courage and strength was drained from their bodies. They had a reputation for breaking up bars. But they knew that instant they made a fatal mistake. This time, they walked into the wrong bar. An opportunity for the Yellen Fed to exit ZIRP came and passed yesterday. Possibly, it will be more convenient to start a rate hike cycle in October/December or possibly, in 2016. But if China enters a recession, and financial markets remain stressed, it is also possible that the Fed will be unable to raise rates during the...

China is at the end-game of its great economic transformation. Multiple iterations of 5-year plans, and flawed central economic planning, created a massive build-up in debt that can no longer be continued. China’s debt fueled growth is understood, but the impact of the deleveraging phase is becoming evident in real time. Various estimates of China debt exist, but given the proliferation of shadow banking, and state involvement in the corporate sector, China’s total debt is a nebulous subject. Using estimates, China debt rose from $1 trillion in 2001 to $30 trillion today. China GDP is approximately 10x larger during a period in which debt rose 30x. McKinsey Global Institute estimates China debt-GDP at 282% in 2014. China’s economic problem is straightforward. Party rulers believed steadfast in the ability to...